Inventory positions in US manufacturing: A competitive dynamics approach

Rajat Mishra, Abdul A. Rasheed, Mahmut Yasar, Randy Napier and Alper Nakkas

International Journal of Production Economics, 2021, vol. 238, issue C

Abstract: We investigate competitive interactions in the context of inventory management by examining how the leader firm's past inventory management affects the challenger firm's current inventory management and how the challenger firm's past inventory management affects the leader firm's current inventory management. The leader and the challenger firms in an industry are respectively the firms holding the highest and second highest market share. We also investigate the moderating effects of market share gap and industry growth on this dynamic relationship. Based on a sample of 4897 firm-year observations in the U.S. manufacturing sector and covering the period 1987–2015, we find that the inventory management decisions of a firm are significantly affected by the actions of its main rival. This dynamic relationship, triggered as a result of competitive imitation in inventory management, is found to be significantly moderated by market share differences between the two firms. We also offer a mathematical model that illustrates the competitive action-reaction cycle regarding inventory decisions, and we extend the existing literature on competitive dynamics to recognize strategic and tactical inventory decisions.

Keywords: Inventory management; Competitive dynamics; Schumpeter; Industry growth; Market share difference (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:238:y:2021:i:c:s0925527321001432

DOI: 10.1016/j.ijpe.2021.108167

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